Chief Tax Information Officer
Published on: January 08, 2020
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The IRS has certain requirements a child must meet in order to be considered a dependent for tax purposes. The five requirements to be considered a qualifying child are:
1. Relationship: Must be your child, step-child, adopted or foster child, sibling, step-sibling, or descendant of any of those (such as a grandchild).
2. Age: The child is younger than you or your spouse (if you file a joint return) and younger than 19 or younger than 24 if the child is a full-time student. The child may be any age if permanently and totally disabled.
3. Residence: The child must live with you or your spouse (if you file a joint return) in the United States for more than half the year.
4. Support: The child’s income must not have provided more than half of his or her support for the year.
Joint Return: The child cannot file a joint return for the tax year unless the child and the child’s spouse did not have a separate filing requirement and filed the joint return only to claim a refund.
When two parents are married and live together, claiming dependents usually isn’t a question, especially when the parents file a joint return. If a child’s two parents are separated or divorced, confusion may arise about who can claim the child as a dependent.
The parent that the child lived with for the greatest number of nights during the year is considered the custodial parent, while the other parent is the noncustodial parent. In most cases, the child is the qualifying child of the custodial parent because of the residency requirement (see above). If the child stayed with each parent an equal number of nights, the custodial parent is the parent with the highest Adjusted Gross Income (AGI).
A custodial parent can choose not to claim the child as a dependent on his or her tax return and allow the noncustodial parent to claim the child instead. The custodial parent should fill out Part I or Part II of Form 8332 or write a similar statement that contains the information required by the form to release a claim to an exemption for a child to the noncustodial parent. The release can be specified to apply for one year, a specific number of years, alternating years, or all future years. (The release may be revoked in the future by filling out Part III of Form 8332.)
The noncustodial parent should attach the form or statement to their tax return. With this release, they are able to claim the child as a dependent and claim the child as a qualifying child for the child tax credit. However, the noncustodial parent is not permitted to claim head of household filing status, the EITC, the health coverage tax credit, or the credit for child and dependent care expenses.
It’s possible that the same child may be eligible to be claimed as a dependent by more than one relative, such as when a child lives with a grandparent.
The first rule states that If only one of the people is the child’s parent, the parent can claim the child. For example, a parent would take precedence over a grandparent caregiver. If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person with the highest AGI.
If someone else has already claimed your dependent, when you attempt to file your return electronically the IRS will reject your return. The IRS will apply the tiebreaker rules to see who has the right to claim the dependent, but they can only do this with a paper return. Mail in your return to the IRS (usually, paper returns take six to eight weeks to process).
After the IRS processes your return, you may receive a letter from the asking you to file an amended return if you claimed the dependent in error, or do nothing if you did not make a mistake. The other person who claimed the dependent will get the same letter. If one of you doesn’t file an amended return, the IRS will audit one or both of you to determine who can claim the dependent.
The rules surrounding qualifying children and claiming dependents can be complicated. If you realize you made a mistake and need to add or remove dependents from your return, you can file Form 1040X by mail. This is an amended tax return that will allow you to make the changes you need and explain why the changes are being made. In most cases, amended tax returns can be filed up to three years of the original filing deadline.
If you’re audited, you’ll be asked to provide proof that you’re entitled to claim the dependent. Take a look at Form 886-H-DEP to see what kinds of documentation you may be asked for. After the IRS makes a decision, they will assess any additional taxes, penalties, and fees to the person who incorrectly claimed the dependent. There is always the opportunity to appeal the decision if you don’t agree!
About the Author
Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.
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